The paper “ The Real Price of Oil and the Ghost of Matthew Simmons” is a meaty example of the statistics project on macro & microeconomics. Before the famous bet between Simmons and Tierney, the two had never met. According to Simmons, the price of crude oil per barrel would triple. Simmons said; “ We're going to look back at history and say $55 a barrel was cheap” . He pointed out that, this was because; the price of oil per barrel would soon hit the triple digits. On the other hand, Tierney did not support those claims and they had to fashion a bet.
It’ s from the bet that the two agreed that they would record the closing price of oil per barrel daily of the year 2010. In addition, they would calculate the averages each month and record them. The calculations would then be adjusted to the prices of 2005 for inflation. It was agreed that in case the average ends up being more than $200 per barrel, Simmons would be the winner and if the average prices would be less than $200 per barrel, then Mr.
Tierney would be the winner. A total sum of $15, 000 would be the price for the winner. Factors that Determine the Global Supply and Demand for OilDemand and supply apparently affect the prices of commodities and specifically, the oil prices. Tierney (2010) pointed out that in 2008 for instance; the average price of oil per barrel was $99.57. This was an increase in price from $72.36 in 2007 due to an increase in demand for commodities and also the demand for oil. Supply on the other hand influences oil prices in such that; with an increase in supply, there is a resultant decrease in price.
Tierney (2005) states that in the 1970s the prices of oil quintupled and then the prices dropped, this was attributed to the fact there were new discoveries and technological advancements. These developments led to an increase in supply and the consequent drop in prices. In the article ‘ The Breaking Point’ by Peter Maass (2005), the author points out that, the high prices of oil were attributed to the shortages in the oil refinery and the increased demand.
As he notes “ thanks to record prices caused by refinery shortages and surging demand -- most notably in the United States and China -- which has strained the capacity of oil producers and especially Saudi Arabia, the largest exporter of all. ”
Maass, P. (2005), Breaking Point, New York Times. August 21, 2005
Mills, R. M. (2008). The myth of the oil crisis: overcoming the challenges of depletion, geopolitics, and global warming. New York: Greenwood Publishing Group
Tierney, J. (1990) Betting on the planet, New York Times. December 2, 1990
Tierney, J (2005) “The $ 10, 000 Question’, New York Times, August 23, 2005
Tierney, J (2010) Economic optimism? Yes, ill take the bet, New York Times December 27, 2010